I really like the look of the pepper market and I don't find the concept too confusing either. There used to be a restaurant chain here in Germany that worked that way, so I guess it helps that I am already familiar with the concept. I just think it does really sound a bit expensive...
The easiest way to order a soda is to ask for exactly what you want, most of the English names would work in touristy areas as well, but here are the German names (most of them are the same anyway...) - oh and we are not very brand conscios. They will serve you whatever they have, wether it is coke or pepsi.
Coke: "Cola" in German (which is also the generic name, if you need to be specific, "Coca-Cola" is used, but very little...)
Diet Coke: "Cola Light"
Coke Zero: "Coke Zero" (not readily available in restaurants, however it might happen that in a restaurant they will serve you coke zero if you ask for "Cola Light")
Fanta Orange: "Fanta" - in restaurants it is only sold in the orange variety, grape soda does not exist in Germany. But in supermarkets, there are are all kind of strange tastes like wild berry or tangerine...
Sprite: "Sprite" (that's easy!)
in addition to that there are also more typical German sodas/soft drinks:
"Spezi" (pronounced like shpetsy): the specific product by the coca-cola-company is called Mezzo Mix, but everyone uses the generic name for this one. It is half coke and half fanta. Can be found at Club Cool in Epcot btw.
"Apfelschorle (pronounced like "up-fell-shore-lay"): half apple juice and half sparkling mineral water. The most popular soft drink here in Germany. Most restaurants will mix it themselfs, but in shops it can also be found pre-mixed in bottles. You will also be able to get other juices as "Schorle", but this varies. If available, I like cherry (Kirsch) juice or black currant (Johannisbeere) juice that way.
"Zitronenlimo" (pronounced "tsitronen-limo"): lemon soda, as compared to sprite which is lemon and lime. The difference isn't that big, and often you will be served sprite if you order Zitronenlimo. But some places make a difference.
"Fassbrause" (pronounced "fuss-browse-ay"): only available in Berlin. I never tried it, but it is used to make "Berliner Weiße" with it. "Berliner Weiße" however, is not a soft drink, it is wheat beer mixed with Fassbrause and either raspberry syrup or "sweet woodruff" syrup.
And since I already mentioned Berliner Weiße, another drink like that is "Radler" which is half beer and half Zitronenlimo (at least that's what the purists say, today it is often made with sprite).
And finally on the water situation: Germans mainly drink bottled mineral water, tap water never was very common and still water just became popular within the last 15 years. Germans don't rely on water being available at restaurants. However, in touristy areas, they might be used to foreigners (not only Americans, but also Italians, French, etc.) to ask for tap water, which is called "Leitungswasser" (pronounced "light-ungs-vasser"). But be prepared for it to be just that. Ice water is just not availabe here. Also, most of your drinks will come chilled, but without ice. You can try to ask for ice cubes ("Eiswürfel" pronounced "ice-voor-fell"). However, I would recommend to get a water bottle to take along to fill up at water taps (all tap water is absolutely safe here to drink and most places it tastes very good!) or buy water at the supermarket and at restaurants just have fun trying different drinks.
Thanks Glenn, for letting me post the definite guide to German soft drinks on your thread!